German businesses worry EU digital tax will worsen transatlantic tensions

BERLIN (Reuters) - Germany’s BDI industry association said on Monday it opposed new rules suggested by the European Commission to make digital companies pay more tax, saying this would create extra burdens and could worsen already-strained ties with the United States.

U.S. President Donald Trump has given the European Union and six countries until May 1 to negotiate permanent exemptions from tariffs of 25 percent on steel and 10 percent on aluminum.

“The proposal for an EU digital tax comes at an inopportune moment because it increases transatlantic tensions,” said Joachim Lang, managing director of the BDI industry association.

“With this proposal, the European Commission risks exacerbating the trade conflict with the USA,” he added.

The European Commission made the proposal for digital companies to pay more tax in March. U.S. tech giants such as Google GOOGL.O, Facebook FB.O and Amazon AMZN.O would foot a large chunk of any bill.

The Commission said top digital firms, whose average revenue growth of 14 percent far exceeded that of other multinationals, faced an effective tax rate of 9.5 percent, less than half the level of traditional companies.

Under the plan, companies with significant digital revenues in Europe will pay a 3 percent tax on their turnover on various online services in the European Union, bringing in an estimated 5 billion euros ($6.18 billion).

The European Parliament and all 28 member states need to back the tax reforms for them to become law.

Irish Prime Minister Leo Varadkar and other EU leaders oppose the Commission’s plans to claw tax from the digital economy. Despite support from big powers Germany and, especially, France, that risks making it very hard to turn the idea into European law.

Reporting by Gernot Heller in Berlin and Philip Blenkinsop in Brussels; Writing by Michelle Martin; Editing by Jon Boyle